Merchant Services – who is who?
Issuers, Acquirers, ISOs, Gateways, Processors…. Who are they all?
In the search for your merchant service supplier, you have probably come across a confusing array of organisations who sit at various points in the money transfer chain. Sometimes it can be hard to understand just who is taking the payments for you and what they are doing. We’ve put together our simple guide to give you an overview of the different types of players and demystify the process for you.
Issuers are essentially regulated financial organisations who are approved to issue credit and debit cards to consumers and businesses. As you would expect, they include the high street banks (Barclays. TSB, etc) and credit card companies (MBNA, Capital One) but also other organisations such as retailers (Tesco) have entered this space.
The issuer exists to recruit cardholders and get them to put spend through the system. Typically, they make their money from sources such as interest rates and late payment charges but they also take a cut of the interchange rate.
Issuers typically don’t want to take the risks (fraud, etc) on card transactions so a layer of organisations has evolved which underwrite the transfers. These “Acquirers” are typically high street banks and their schemes are backed by the big two credit card players – Visa and Mastercard.
In the UK there are 6 main acquirers:
- Allied Irish Bank
The acquirer underwrites the card transactions and provides the technology to merchants to process card payments. They make their money through taking a cut of the transaction fees charged to merchants and also from monthly hire fees for card terminals.
Acquirers are actively seeking to sign up merchants to their platform and any merchant in the UK who takes card payments will ultimately be going directly or indirectly through one of the “big six” acquirers.
Processors exist to provide acquirers with the technology platform to run their card payment systems. Typically acquirers will outsource this function but some, such as Worldpay, run their processing in-house.
Some of the big names in the sector are Elavon, First Data, and Global Payments which you may occasionally hear bandied about by salespeople.
Independent Sales Organisations, “ISOs” are essentially resellers for the acquiring banks. They re-brand the services offered by the acquirers and go out and recruit merchants under their own banner. Some of the big names you may have heard of include Retail Merchant Services, Handepay, Payfficiency and Card Cutters.
ISOs make their money through taking a cut on the processing fees their merchants pay. As another link in the chain you might be forgiven for thinking that going through an ISO will be more expensive than going straight to the acquirer as they will be adding on their mark up. However, this is not necessarily true. Firstly, ISOs operate in a hugely competitive marketplace and are often forced to cut rates to the bone to secure merchants’ custom. Secondly, as they are able to aggregate transaction volume across all their merchants, they are able to negotiate lower transaction rates from the acquirers which they are able to pass on.
This isn’t always the case, of course, so you need to be careful and only speak to the most reputable ISOs when researching your deal.
5. Payment Gateways
With the rise of e-commerce, new technology has been needed to allow merchants to process online payments swiftly and securely. This is where payment gateways come in. Gateways are essentially online terminals that collect payment details from the customer, passing them onto the acquirer and also to the merchant for payment.
Typically, each acquirer or ISO will work with its preferred payment gateway but the common names you might hear include Sagepay, PayPal and NoChex. Worldpay, as a fully integrated operation has its own gateway.
So, after reading this, the question you are probably asking is “Which one is Independent Merchant Services?” The answer is that we are none of them. Instead, we act as a type of independent help desk, advising our clients on what the right deal for them would be. Pick up the phone or fill in our contact form for a free, no strings consultation with us now to discuss your needs in more detail.